Coinstar counting on growth of automated retail

The retail industry is full of prognosticators and speculators claiming to know the future of the industry. But one prophecy that many of those fortune-tellers have in common is the undeniable influence that technology will have on both the consumer and the retailer. According to Coinstar, much of that technology will revolve around automation.

Automated retail exhibits strong viability because it "gives retailers, who are operating on razor-thin margins, an opportunity to take underutilized space in the store," said Paul Davis, Coinstar's exiting director and CEO, during last week's investor conference. Consumers love automated retail, too, he said, "because, well, consumers are time-starved, they don't have a lot of time on their hands, and they're looking for easy solutions within arm's reach."

J. Scott di Valerio, Coinstar's CFO, identified the so-called "sweet spot" that Coinstar is targeting with its focus on six specific consumer sectors for automation: money, entertainment, electronics, health, beauty, and food and beverage. That sweet spot amounts to roughly $16 billion in expected revenue out of an overall addressable market of $85 billion, Valerio said.

"People want to get what they want, when they want it. And automated retail provides that," he said.

During the investor conference, Coinstar executives outlined the company's push into broader markets through the use of automated kiosks. Coin-counting, DVDs and coffee make up much of the company's plans for revenue growth, but there is an increased focus on other markets, such as beauty products, gift cards, fresh food and photography.

Kiosk upgrades

Coinstar announced last week on the day of its investor conference the rollout of PayPal-integrated coin-counting kiosks. The service allows customers to add money to, or withdraw money from, their PayPal account directly from the Coinstar kiosks.

With the PayPal feature, Coinstar is positioning itself for entrance into the mobile marketplace, said Mike Skinner, president of Coinstar's coin and e-payment services, noting "the tremendous opportunity that we believe it opens up for both of our companies as we look to expand and take advantage of the growing interest in the digital wallet."

David Veenstra, Coinstar's SVP of new ventures and business development, gave investors an update on Rubi. He said more than 80 of the coffee kiosks have been deployed across five market locations — inlcuding a new second-generation model that offers larger portions and fewer technical hiccups. The Rubi business represents a key growth engine for the company, with currently deployed Rubi kiosks showing strong results, he said.

"Consumers really love the product," Veenstra said. "They're voting with their wallets in the market."

Along with the new kiosk features, Coinstar will continue to push its Alula kiosk which allows customers to immediately unlock the monetary value left on unwanted gift cards.

"We're in the very early stages of this business," Skinner said. "We have just a little over 50 [Alula] kiosks in the marketplace today."

Coinstar is entering the quick-service food industry with the introduction of Crisp Market, a kiosk that offers fresh food on-demand in potential locations such as athletic centers and office parks. Valerio called the kiosk Coinstar's "newest seed," with only one Crisp Market currently deployed in a Chicago office building.

"The response is phenomenal," said Valerio. "The immediate returns are very, very good."

Another small-scale deployment and new product for Coinstar is its Sample it! kiosk which allows customers to purchase samples of beauty products for $1.

"Think of the beauty sampling that you might do at a department store," Veenstra said. "This is trying to bring that experience to the mass channel in an automated and a targeted way."

Coinstar ended 2012 with only two Sample it! kiosks deployed, but Veenstra said interest from both consumers and brands is very promising.

"Consumers love it because you can try before you buy. Retailers love it because it's a way to lift category sales," he said.

Coinstar plans to have 20 of the beauty sampling kiosks installed by the end of 2013, with expansion going beyond the grocery store and into drug store and other retail outlets.

Throughout 2013, Coinstar also plans to continue its aggressive attack on the photo booth space. Its Star Studio photo booth kiosk targets teen girls in shopping malls by bringing together social media, connected content and green screen technology for an interactive and sharable experience. Veenstra said that 40 Star Studio kiosks were deployed by the end of 2012 and set the goal at 200 in terms of kiosks to be deployed by the end of 2013.

Farewell, Paul Davis

The topic of Davis' departure, scheduled for March 31, was not discussed at the investor's conference. Instead, Davis gave closing remarks that directed focus toward Coinstar's strengths and outlook for the future.

"There's not another business that's in the same position as we are," Davis said. "There's not another company that understands the consumer and has the relationship built with the consumer that can drive this business in the way that is going to be very successful and to take advantage of this large market opportunity that we have."